What do you think of peer-to-peer lending (Prosper.com, LendingTree.com, Zopa.com, etc.)?
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Personally, I think that peer-to-peer lending is an excellent idea. It increases the return for investors and reduces the rate for lenders (vs banks). It is also perfect for small loans and short-term loans, which banks don’t even offer. My biggest concern is that everything has a time and place, and this is DEFINITELY not the time (for potential lenders), although hopefully the US will become the place.
Internationally, Peer-to-Peer defaults are <5%. I wouldn’t be surprised if they were in the 20%-50% default rate here and now. We already know that the average US consumer spends more than they earn (incredible!). So what happens if they are able to get money on the internet and faced with a choice like this:
a) pay mortgage
b) pay car loan
c) pay for food
d) pay for gas
e) pay anonymous lender on the internet
So while 8%-20% rate of returns are tempting, I would wait until the attitudes (and debt) adjusts before getting into this in the US. What are other opinions on the subject?
I have been a lender on Prosper.com since March 2007, with about $2,400 invested. Although my projected ROI is currently about 9%, I stopped lending in October for a variety of reasons all linked to Prosper’s management. Basically, the best way to summarize Prosper is that it is a wonderful concept, executed horribly due to the incompetence and arrogance of management.
There are too many serious problems with Prosper to list here, but brief review of www.prospers.org, which is the largest Prosper forums, will provide anyone interested with a long list. Here are a few:
1) The default rate on Prosper is MUCH higher than advertised. Chris Larsen, Prosper’s CEO has been quoted in news articles saying the default rate is 2.7%. While perhaps technically accurate using Prosper’s narrow definition of "default," this is utter balderdash from any real perspective. Prosper only counts a loan as defaulted when it sells it to a junk debt buyer for pennies on the dollar. However, Prosper currently has such sales only quarterly, so it is not uncommon for there to be many loans that are 5, 6, 7, or more months late. Historically, loans almost never come back from being even 3 months late, so all of these loans are defaults in everything but name. Moreover, Prosper calculates its official default rate as the number of defaults divided by the number of loans, but because many loans are too new to have defaulted even if the borrower never made even the first payment (which happens far more often than you might think), this also tends to understate the default rate. So far as can be seen, the real default rate appears likely to be close to 20%.
2) Another problem with Prosper’s handling of defaulted loans, is that the process completely lacks transparency. Prosper flatly refuses to disclose the identity of any of the junk debt buyers that have purchased defaulted Prosper loans, the identity of (or even the number of) any junk debt buyers that have sought or been solicited to participate in the junk debt sales, the process Prosper uses to advertise the junk debt sales to possible buyers, or the method used to calculate the sale prices of the various defaulted loans. Prosper lenders – who, after all, actually OWN the defaulted loans being sold by Prosper for pennies on the dollar – have no idea whether Prosper diligently and/or successfully obtains as high a price as possible for the defaulted loans, or simply sells them off to the first buyer it can find, regardless of price. For that matter, without transparency there is no way to be sure that Prosper doesn’t simply sell the defaulted loans at a favorable price to a company controlled by a Prosper insider. Given Prosper’s many other shortcomings, there is no good reason to believe that Prosper handles the junk debt sales in an appropriate and competent manner. Moreover, there is at least one piece of evidence that it doesn’t. Long before the last junk debt sale, a lender and forum member made a firm offer to purchase a particular loan that was headed to default. He made this offer by sending it certified mail, return receipt requested, to Prosper’s VP of collections and to its General Counsel. Prosper completely ignored this offer for almost two months, and then sent a rejection letter at the same time it sold the loan (along with others) to a junk debt buyer for considerably less than what had been offered to Prosper. This unjustified rejection by Prosper collectively cost the almost three-dozen lenders on that loan $500, which was the difference between the rejected offer and the actual sales price to the junk debt buyer Prosper chose to sell the loan to instead.
3) One of the contributing factors to issue #1, is that Prosper’s collections are anemic. When a loan turns 1 month late it is turned over to Prosper’s collection agency, but historically, only around 15% of loans in collections are brought current. There have been many anecdotal stories by late or defaulted borrowers on Prosper’s old forums that they either were never contacted by the collection agency, or the contact consisted of an email or 2 and maybe a phone call or two. Prosper’s own newly-hired VP of Collections admitted that the call logs from the collection agency showed that they were repeatedly trying to contact borrowers at the same time of day, such as between 3-5 pm, so if the borrower worked during the day, no contact was made.
4) Very little information about the borrowers is verified by Prosper. Prosper selects a subset of fully-funded listings to verify employment and income, but many listings become loans without such verification. Prosper has already had to repurchase about $400,000 of loans under its ID-theft guarantee, meaning that Prosper let many fraudulent loans through its systems. Indeed, there is one case (identified by a diligent forum member) where one person obtained a dozen loans from Prosper under different identities. After the forum member outed this on the old forum, Prosper repurchased the loans and sued the borrower in Los Angeles Superior Court to get its own money back. However, there is substantial doubt among the lending community that Prosper tries very hard to identify ID-theft loans, because when it does, it has to repurchase them from lenders.
5) Although Prosper has funded a number of fraudulent loans, it has also cancelled a number of legitimate loans, apparently through incompetence. One such loan involved the brother of a well-respected Prosper lender and very active forum participant. After claiming that faxed documents were illegible and then that Prosper couldn’t open a .pdf file, it cancelled the fully-funded listing with no opportunity for the borrower to resubmit the documents. There have been many other Keystone Kops situations involving Prosper’s verification.
6) Related to issue #5, Prosper’s customer service is terrible. Often, they let the phone just ring and ring without answering it. When you send an email, the response is often irrelevant boilerplate. Lenders used to provide a lot of Prosper’s customer service for free on their old forums.
7) Prosper’s advertising is highly misleading in many ways, if not downright fraudulent. They overstate interest rates in ads directed to lenders, and understate them in ads directed to borrowers. Prosper was caught once apparently having photoshopped a screen shot of an actual listing in an advertisement about the rate (changing the actual rate to something more beneficial). Also, Prosper has repeatedly sent out mass email ads featuring borrower and lender testimonials that were quickly proven to be false. After the first time, Prosper admitted that it hadn’t verified the facts claimed by the person, and said it would do so in the future. But whoops, they promptly did it again (in a different testimonial) in the next ad.
8 ) Prosper used to have a vibrant community on its official forums, with about 400,000 posts. These forums were an amazing learning experience for lenders, so that new lenders could avoid the mistakes of their predecessors. Prosper banned me from the forums and from lending (although I had already publicly announced that I had stopped lending due to Prosper’s mismanagement) because I sent a bunch of PM’s to new lenders alerting them to the existence of Prosper’s own official forums. Then, the day before Thanksgiving, Prosper deleted its entire forum with no notice, in an effort to hide the truth from new lenders. It then replaced the old forums with a super-moderated version that is completely useless (every post must be approved before being posted, which often takes days even when the moderator lets it through).
9) When another forum member made an archive of the old forums available on www.prosperreport.com, Prosper had its lawyers send a threatening letter seeking to take the domain away on baseless trademark, unfair competition and cybersquatting grounds. Undoubtedly, Prosper figured this person would cave in and take down the site. Instead, he retained a lawyer from Public Citizen, who responded to Prosper’s letter by explaining how Prosper’s claims are entirely without merit. Both letters are posted on the site. Prosper has yet to respond.
(10) Prosper also misappropriated thousands of dollars of lenders’ money by charging its servicing fee on loans that were more than a month late, contrary to Prosper’s own legal agreements. This too was discovered by yet another forum member. Prosper admitted that its action was "in error," but only recently returned this money to lenders despite having promised to do so months ago.
(11) Another significant issue is whether Prosper will even survive as a company for the three-year term of its loans. As can be seen on www.Lendingstats.com, loan originations have been essentially flat for the last nine months, and Prosper’s CEO has admitted that loan originations need to increase 400%-500% in order for Prosper to turn a profit. Given that, clearly the outlook is troubling. Although the Prosper Lending Agreement specifies that if Prosper goes out of business the loan servicing will be taken over by another servicing company, there is no guarantee that any such company can and will be found, or that the transition will go smoothly, or that the new company won’t require higher fees in order to do the servicing.
The above issues are really just the tip of the iceberg. If anyone is considering lending on Prosper, do your due diligence. Read www.prospers.org, and check out the actual performance of lenders on www.lendingstats.com. For example, you will see that looking at ALL moderately seasoned lenders on Prosper (those with >20 loans and >6 month average loan age), the median projected ROI is around a mere 4.5%. That is close to what E-Loan is offering on its FDIC-insured, 100% liquid
Has anyone out there been a "lender" on a peer-to-peer lending site?
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And if so, how has it worked for you? Have you made OK money? Lost any? Defaults? How often do you get a payment?
I deal right here in the good old USA. I joined Prosper.com last April and help fund ten loans so far. They do all of the work, paperwork, I just lend money and collect. I have one loan that went bad but I am waiting for a 1099b regarding that one particular loan so I can complete a Schedule D for my income taxes. I lost $96. I have lended over $1,100 so far, collected $62 in principal and $42 in interest. Borrowers can borrowed 25K and have three years to pay. Here is their site: http://www.propser.com/join/heyhobbs
How can I change and mould the character of boys in a hostile Christian community?
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I have registered 28 boys between the ages of 5 and 15 in a community which is hostile to Christianity. In this era of terrorism, armed robbery, drug addiction, homosexuality, suicide bombings, and other social vices, my aim is to inculcate into them Christian virtues and principles so that their life style can have an impact on their peers and the community as a whole. What topics should I consider when counselling them? Any other suggestions or help will be highly appreciated.
Make sure you are a living example of what true Christianity is. Act out God’s love for them so that they can see what you want them to see… Christ in you. Be open and honest about your beliefs, but don’t make them feel like you are pushing it onto them. Just love them, love them, love them.
Maybe you could have a Q&A time and tell them that since Christianity is so controversial, you want to give them the chance to ask the questions that are on their mind about it. That could be a great way to start some conversations. Just be sure you are prepared to answer the tough questions and have a Bible on hand! Make sure that the gospel message is central, and at the end make sure it’s what you always go back to. If they have any physical needs (clothes, better food, help with homework, whatever), meet those needs. That is a very biblical principle.
You can’t really "indoctrinate" or "mold" anyone. The best you can do is share God’s love with them. Tell them the message, and let the Spirit do the rest. The choice is ultimately theirs, and if you respect their individuality in this way, they will probably appreciate it. The Bible says His Word never goes out without accomplishing the purpose it was sent out to do. Use biblical principles in your speech every chance you get.
More than anything, pray. I’ll pray for you. God will give you the direction you need as long as you earnestly seek Him. Be a lover of His heart. Go after Him with everything in you. He will give you what you need in the moment you need it. Trust Him and believe that He is capable of miracles!
What are the benefits given to a full stockbroker? Both financial and mentally?
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Please serious answers i need this for a report tomorrow in front of about 30 peers and its worth like half my grade thanks
All details are on their home page.
peer to peer loan websites?? 10 easy points?
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anyone know any good peer to peer loan websites?? or does anyone know of any other loans that work with bad or not so good credit
prosper.com
zopa.com
lendingclub.com
Do Peer to Peer lending sites charge lower rates on loans?
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https://www.lendingclub.com//invite/respond.action?int=67555&referrer=David_Sims
Usually , no..
AND they are rife with fraud…beware,…
There is a peer to peer website that allows people to give each other loans. What is it called?
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I saw this on the news a long time ago and can’t remember what it is called. Basically, how it works is that if you need money for something, you create a profile and say why you need it, and then another user might loan you the money, and then you have to pay them back. So you can either be a lender or a borrower, and it is free. The website does not guarantee that you get your money back if you give a loan. So what is the name of the site? Thanks!
It’s called, that is the worst idea ever.
Peer to Peer Loan Methods?
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Is there any service that enables peer to peer loaning service? This allows a lower rate for the borrower and a higher interest rate for the loaning party than traditional CD’s through bypassing the middleman(big banks). If not, is this a good idea? How would the risk of the borrowing party not repaying be eliminated or even reduced? Would you participate and earn a possible 10% on your loaned capital? Thanks for input!
prosper.com?
kourtnie
www.debthardship.net
Peer to Peer loans … who knows about them?
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I am in the market for a personal line of credit not installment loan for my particular situation. But, while doing my research I found this new way (or not so new) of investing (lending) and borrowing money.
My question is if anyone out there has taken out a loan like this or lent any money through this. What were your experiences … good or bad. People who invested/lent money how was the return on your investment?
also … if anyone knows the best place to go for a personal line of credit for 25k – 30k for someone who was 750 fico.
thanks
I think that you will have trouble getting a loan that large. Most P2P lending is <10k. The reason it started was because many banks usually didn’t bother with smaller loans.
I think that most sites do not have a reliable way to verify a person’s credit, so it doesn’t matter if it is 750 or 500.
You might want to read this:
http://answers.yahoo.com/question/index;_ylt=Amse9XHnCFvza4IEv1KwEOHty6IX;_ylv=3?qid=20080306195257AAnMn5n
Are there any peer to peer lending groups that are operating right now?
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I checked prosper.com and they are not operating right now. So, I was just wondering if anyone knows of any that ARE operating. I need a small (VERY small) loan for business expenses, and a bank won’t even touch a $600 loan.
Thank you in advance!
Yes. LC is operating for lenders and borrowers.
Here’s their link:
http://www.moneyscrounger.com/LC/borrowers